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First Interstate BancSystem, Inc. Reports Second Quarter 2012 Results

Stocks in this article: FIBK

A more detailed discussion of each of the foregoing risks is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, filed February 28, 2012. These factors and the other risk factors described in the Company's periodic and current reports filed with the Securities and Exchange Commission from time to time, however, are not necessarily all of the important factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed in or implied by any of the Company's forward-looking statements. Other unknown or unpredictable factors also could harm the Company's results. Investors and others are encouraged to read the more detailed discussion of the Company's risks contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

All forward-looking statements attributable to the Company or persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made and the Company does not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If the Company updates one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.

 
CONSOLIDATED BALANCE SHEETS

(Unaudited, $ in thousands)

 
    June 30,2012   March 31,2012   June 30,2011
Assets      
Cash and due from banks $ 146,577 $ 128,341 $ 130,413
Federal funds sold 2,854 304 1,764
Interest bearing deposits in banks   387,222     494,279     283,314
Total cash and cash equivalents   536,653     622,924     415,491
Investment securities:
Available-for-sale 1,913,983 1,955,436 1,873,864
Held-to-maturity (estimated fair values of $177,532, $166,932 and $153,448 at June 30, 2012, March 31, 2012 and June 30, 2011, respectively)   166,926     158,070     148,865
Total investment securities   2,080,909     2,113,506     2,022,729
Loans held for investment 4,093,815 4,099,936 4,252,762
Mortgage loans held for sale   76,148     58,680     28,498
Total loans   4,169,963     4,158,616     4,281,260
Less allowance for loan losses   102,794     115,902     124,579
Net loans   4,067,169     4,042,714     4,156,681
Premises and equipment, net of accumulated depreciation 187,367 185,230 186,529
Goodwill 183,673 183,673 183,673
Company-owned life insurance 75,849 75,342 74,080
Other real estate owned ("OREO"), net of write-downs 53,817 44,756 28,323
Accrued interest receivable 30,936 30,407 33,588
Mortgage servicing rights, net of accumulated amortization and impairment reserve 11,985 11,833 13,218
Core deposit intangibles, net of accumulated amortization 6,647 7,002 8,080
Deferred tax asset, net 5,017 9,571 10,466
Other assets   65,154     67,348     69,933
Total assets   $ 7,305,176     $ 7,394,306     $ 7,202,791
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing $ 1,337,777 $ 1,284,823 $ 1,109,905
Interest bearing   4,563,602     4,626,011     4,684,760
Total deposits   5,901,379     5,910,834     5,794,665
Securities sold under repurchase agreements 455,993 491,058 435,039
Accounts payable and accrued expenses 33,589 43,972 35,395
Accrued interest payable 8,215 8,255 11,712
Long-term debt 37,181 37,191 37,480
Other borrowed funds 7 6 5,440
Subordinated debentures held by subsidiary trusts   82,477     123,715     123,715
Total liabilities   6,518,841     6,615,031     6,443,446
Stockholders’ equity:
Preferred stock 50,000 50,000 50,000
Common stock 269,698 268,411 265,639
Retained earnings 448,372 441,370 421,309
Accumulated other comprehensive income, net   18,265     19,494     22,397
Total stockholders’ equity   786,335     779,275     759,345
Total liabilities and stockholders’ equity   $ 7,305,176     $ 7,394,306     $ 7,202,791
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, $ in thousands, except per share data)
 
  Three Months Ended
    June 30,2012   March 31,2012   June 30,2011
Interest income:    
Interest and fees on loans $ 58,084 $ 57,910 $ 61,475
Interest and dividends on investment securities:
Taxable 9,458 9,705 10,649
Exempt from federal taxes 1,240 1,204 1,194
Interest on deposits in banks 279 237 227
Interest on federal funds sold   6     1     6
Total interest income   69,067     69,057     73,551
Interest expense:
Interest on deposits 5,779 6,262 8,903
Interest on securities sold under repurchase agreements 152 156 171
Interest on long-term debt 495 498 495
Interest on subordinated debentures held by subsidiary trusts   1,467     1,507     1,455
Total interest expense   7,893     8,423     11,024
Net interest income 61,174 60,634 62,527
Provision for loan losses   12,000     11,250     15,400
Net interest income after provision for loan losses   49,174     49,384     47,127
Non-interest income:
Income from the origination and sale of loans 9,420 8,384 4,109
Other service charges, commissions and fees 8,254 8,424 7,768
Service charges on deposit accounts 4,455 4,161 4,385
Wealth management revenues 3,815 3,283 3,689
Investment securities gains, net 198 31 16
Other income   1,520     2,099     1,624
Total non-interest income   27,662     26,382     21,591
Non-interest expense:
Salaries and wages 21,640 21,564 20,554
Employee benefits 6,819 8,966 7,335
Occupancy, net 4,037 3,988 4,013
Furniture and equipment 3,189 3,138 3,129
Outsourced technology services 2,179 2,266 2,212
OREO expense, net of income 1,806 1,105 2,042
FDIC insurance premiums 1,601 1,595 1,629
Professional fees 1,002 933 726
Mortgage servicing rights amortization 817 895 671
Mortgage servicing rights impairment (recovery) 52 (868 ) 27
Core deposit intangibles amortization 355 355 361
Other expenses   13,802     13,503     11,493
Total non-interest expense   57,299     57,440     54,192
Income before income tax expense 19,537 18,326 14,526
Income tax expense   6,527     6,112     4,672
Net income 13,010 12,214 9,854
Preferred stock dividends   853     853     853
Net income available to common shareholders   $ 12,157     $ 11,361     $ 9,001
 
Basic earnings per common share $ 0.28 $ 0.26 $ 0.21
Diluted earnings per common share   $ 0.28     $ 0.26     $ 0.21
 
CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, $ in thousands, except per share data)

 
  Six Months Ended
    June 30,2012   June 30,2011
Interest income:  
Interest and fees on loans $ 115,994 $ 123,866
Interest and dividends on investment securities:
Taxable 19,163 20,560
Exempt from federal taxes 2,444 2,365
Interest on deposits in banks 516 594
Interest on federal funds sold   7     9  
Total interest income   138,124     147,394  
Interest expense:
Interest on deposits 12,041 18,774
Interest on securities sold under repurchase agreements 308 408
Interest on long-term debt 993 984
Interest on subordinated debentures held by subsidiary trusts   2,974     2,903  
Total interest expense   16,316     23,069  
Net interest income: 121,808 124,325
Provision for loan losses   23,250     30,400  
Net interest income after provision for loan losses   98,558     93,925  
Non-interest income:
Income from the origination and sale of loans 17,804 7,554
Other service charges, commissions and fees 16,678 15,148
Service charges on deposit accounts 8,616 8,495
Wealth management revenues 7,098 6,999
Investment securities gains, net 229 18
Other income   3,619     3,536  
Total non-interest income   54,044     41,750  
Non-interest expense:
Salaries and wages 43,204 40,757
Employee benefits 15,785 14,834
Occupancy, net 8,025 8,228
Furniture and equipment 6,327 6,349
Outsourced technology services 4,445 4,453
FDIC insurance premiums 3,196 4,095
OREO expense, net of income 2,911 3,753
Professional fees 1,935 1,505
Mortgage servicing rights amortization 1,712 1,478
Mortgage servicing rights impairment recovery (816 ) (320 )
Core deposit intangibles amortization 710 723
Other expenses   27,305     21,295  
Total non-interest expense   114,739     107,150  
Income before income tax expense 37,863 28,525
Income tax expense   12,639     9,165  
Net income 25,224 19,360
Preferred stock dividends   1,706     1,697  
Net income available to common shareholders   $ 23,518     $ 17,663  
 
Basic earnings per common share $ 0.55 $ 0.41
Diluted earnings per common share   $ 0.55     $ 0.41  
 
AVERAGE BALANCE SHEETS
(Unaudited, $ in thousands)
 
  Three Months Ended
June 30, 2012   March 31, 2012   June 30, 2011
    Average

Balance

Interest Average

Rate

  Average

Balance

Interest Average

Rate

  Average

Balance

Interest Average

Rate

Interest earning assets:    
Loans (1) (2) $ 4,159,565 $ 58,564 5.66 % $ 4,165,203 $ 58,374 5.64 % $ 4,269,637 $ 61,926 5.82 %
Investment securities (2) 2,094,148 11,414 2.19 2,143,438 11,604 2.18 2,019,187 12,533 2.49
Interest bearing deposits in banks 442,698 279 0.25 374,899 237 0.25 359,446 227 0.25
Federal funds sold   3,668   6   0.66     609   1   0.66     3,871   6   0.62  
Total interest earnings assets 6,700,079 70,263 4.22 6,684,149 70,216 4.23 6,652,141 74,692 4.50
Non-earning assets   633,454         619,137         617,221      
Total assets   $ 7,333,533         $ 7,303,286         $ 7,269,362      
Interest bearing liabilities:
Demand deposits $ 1,596,076 $ 606 0.15 % $ 1,582,805 $ 646 0.16 % $ 1,263,466 $ 847 0.27 %
Savings deposits 1,482,986 934 0.25 1,449,239 1,015 0.28 1,711,210 1,753 0.41
Time deposits 1,496,597 4,239 1.14 1,540,789 4,601 1.20 1,780,542 6,303 1.42
Repurchase agreements 493,450 152 0.12 513,407 156 0.12 469,459 171 0.15
Other borrowed funds 33 35 5,459
Long-term debt 37,184 495 5.35 37,194 498 5.39 37,485 495 5.30
Subordinated debentures held by subsidiary trusts   120,996   1,467   4.88     123,715   1,507   4.90     123,715   1,455   4.72  
Total interest bearing liabilities 5,227,322 7,893 0.61 5,247,184 8,423 0.65 5,391,336 11,024 0.82
Non-interest bearing deposits 1,277,091 1,232,874 1,089,909
Other non-interest bearing liabilities 47,781 50,071 47,791
Stockholders’ equity   781,339         773,157         740,326      
Total liabilities and stockholders’ equity   $ 7,333,533         $ 7,303,286         $ 7,269,362      
Net FTE interest income $ 62,370 $ 61,793 $ 63,668
Less FTE adjustments (2)     (1,196 )       (1,159 )       (1,141 )  
Net interest income from consolidated statements of income     $ 61,174         $ 60,634         $ 62,527    
Interest rate spread       3.61 %       3.58 %       3.68 %
Net FTE interest margin (3)       3.74 %       3.72 %       3.85 %
Cost of funds, including non-interest bearing demand deposits (4)       0.49 %       0.52 %       0.68 %
 

(1) Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material.

 
(2) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.
 

(3) Net FTE interest margin during the period equals the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by average interest earning assets for the period.

 

(4) Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.

 
AVERAGE BALANCE SHEETS

(Unaudited, $ in thousands)

 
Six Months Ended
June 30, 2012   June 30, 2011
  Average

Balance

Interest Average

Rate

  Average

Balance

Interest Average

Rate

Interest earning assets:  
Loans (1) (2) $ 4,162,384 $ 116,938 5.65 % $ 4,286,512 $ 124,762 5.87 %
Investment securities (2) 2,118,793 23,018 2.18 1,984,000 24,291 2.47
Interest bearing deposits in banks 408,799 516 0.25 472,994 594 0.25
Federal funds sold 2,139   7   0.66     3,061   9   0.59  
Total interest earnings assets 6,692,115 140,479 4.22 6,746,567 149,656 4.47
Non-earning assets 626,295         619,837      
Total assets $ 7,318,410         $ 7,366,404      
Interest bearing liabilities:
Demand deposits $ 1,589,440 $ 1,253 0.16 % $ 1,256,414 $ 1,681 0.27 %
Savings deposits 1,466,113 1,948 0.27 1,727,886 3,753 0.44
Time deposits 1,518,693 8,840 1.17 1,827,269 13,340 1.47
Repurchase agreements 503,428 308 0.12 519,392 408 0.16
Other borrowed funds 34 5,577
Long-term debt 37,189 993 5.37 37,490 984 5.29
Subordinated debentures held by subsidiary trusts 122,356   2,974   4.89     123,715   2,903   4.73  
Total interest bearing liabilities 5,237,253 16,316 0.63 5,497,743 23,069 0.85
Non-interest bearing deposits 1,254,983 1,080,379
Other non-interest bearing liabilities 48,926 49,395
Stockholders’ equity 777,248         738,887      
Total liabilities and stockholders’ equity $ 7,318,410         $ 7,366,404      
Net FTE interest income $ 124,163 $ 126,587
Less FTE adjustments (2)   (2,355 )       (2,262 )  
Net interest income from consolidated statements of income   $ 121,808         $ 124,325    
Interest rate spread     3.59 %       3.62 %
Net FTE interest margin (3)     3.73 %       3.78 %
Cost of funds, including non-interest bearing demand deposits (4)     0.51 %       0.71 %
 

(1) Average loan balances include non-accrual loans. Interest income on loans includes amortization of deferred loan fees net of deferred loan costs, which is not material.

 

(2) Interest income and average rates for tax exempt loans and securities are presented on a FTE basis.

 

(3) Net FTE interest margin during the period equals the difference between annualized interest income on interest earning assets and the annualized interest expense on interest bearing liabilities, divided by average interest earning assets for the period.

 

(4) Calculated by dividing total annualized interest on interest bearing liabilities by the sum of total interest bearing liabilities plus non-interest bearing deposits.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principals in the United States of America, or GAAP, this release contains the following non-GAAP financial measures that management uses to evaluate capital adequacy: (i) tangible book value per common share; (ii) net tangible book value per common share; (iii) tangible common stockholders' equity to tangible assets; (iv) net tangible common stockholders' equity to tangible assets; and (v) tangible assets.

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